Many regional economists claim that new projected economic prosperity of India is a "myth" not a "reality". During the past two years, the officials of the government have been announcing India's emergence as an economic power.

While there is no question that with a billion-plus people, India is an economic power by virtue of sheer numbers, the country's economy has in fact remained in the doldrums. A few years of higher growth was cited as proof that the Indian economy had suddenly become strong or as equal to China. The information-technology [IT] sector, contribute paltry 3.2 per cent of India's overall gross domestic product [GDP].

In terms of certain macro-economic parameters, the Indian economy is surely on a much stronger base. Interest rates have been at an all-time low and inflation is under control India's external sector has started showing an admirable degree of strength and resilience. Forex reserves have crossed the $100 billion mark, rising merchandise and service exports have led to a surplus in the current account balance after decades of deficit.

Increased emphasis on non-debt-creating forex inflows have reduced the vulnerability of the economy to external shocks, with India's short-term external debt as a percentage of total external debt reduced to less than 5%. The issue, however, is while reformers of all hues have gone overboard talking about reforms with a human face, how humane has it turned out to be so far?

Continued saga : The onslaught of macroeconomics of growth never percolated to alleviate poverty in India. The growth that has taken place has benefited a handful, mostly in the middle- or upper-middle-income groups, increasing disparity between this layer and the hundreds of millions of India's poor and low-income groups.

The vast number of poor 350 million of whom live on less than $1 a day neither bought the numbers nor the campaign. At the parliamentary polls in April-May 2004, they voted for better infrastructure, farm subsidies and employment opportunities, and they demanded basic education and drinking water.

Under the "pro-poor" the United Progressive Alliance (UPA) government, India is experiencing 8.3 per cent inflation the highest in almost four years. In a country with such a high percentage of people living in poverty, inflation can be devastating. The government attributes the inflation to the oil-price rise and India's central bank, the Reserve Bank of India [RBI], has increased the cash reserve ratio [CRR] by 50 basis points to reduce the money flow into the overheated market.

There is no question that worse is yet to come. It is almost a certainty that the price of oil will not go below $40 to $45 per barrel in the days to come and could even settle well over $45. In either case, the Indian economy, like many others, will suffer and inflation will continue. Moreover, the recent monsoon was poor. Since Indian agriculture is still largely dependent on seasonal rains, the agricultural sector will show a drop in production. With almost 60 per cent of the work-force associated with agriculture, this can wreak havoc on the economy.

The Hong Kong-based Political and Economic Risk Consultancy Ltd has rated India the second most corrupt country in Asia, with a corruption index grade of 8.9 on a scale of 10. Estimates of the quantum of black money in the Indian economy vary from around 20 percent of India's gross domestic product [GDP] to more than 40 percent, and can at best be termed as guesstimates. What is certain, however, is that the web of black money on the economy is increasingly becoming longer and stronger. The dimensions of the growth of corruption and the generation of a black income in India are, indeed, mind-boggling.

Back in 1953-54, the amount of income tax lost through tax evasion was estimated to be between US$44 million to $66 million at current exchange rates. At that time, India's tax authorities felt that the tax evaded would not have exceeded past 10 percent of this estimate. Today, if one were to assume that the parallel economy accounts for 20 percent of India's GDP, and even if 50 percent of the income could have been tapped; the government would have netted $44.4 billion.

Constraints: New Delhi has said 7% economic growth this year will increase its revenues by 25 per cent, helping curb the fiscal deficit. But analysts say the economy is unlikely to achieve the growth forecast as some crop has already been hurt by the lack of rainfall. A record monsoon helped generate 8.2 Per cent economic growth in the last financial year, marking the biggest annual expansion in 15 years. So 7 per cent growth is pretty much out of the question this year.

According to India's Planning Commission, agricultural growth this year could be as low as 1.5 per cent. The average agricultural GDP growth in the first two years of the plan period was 1.8 per cent and is unlikely to exceed 1.5 per cent in the current year against the targeted 4 per cent. Poor agriculture would mean less buying power in the rural sector. Weak harvests reduce rural income, hitting the corporate sector that provides the bulk of the government revenue. A study by an independent think-tank, the National Council for Applied Economic Research [NCAER], found that nearly 55 per cent of India's motorcycles, 56% of soaps and detergents, and nearly 50 per cent of watches were sold in rural areas.

The number of households with an annual income between $1,000 and $4,000 in rural areas is double that of the urban ones, making rural purchasing power crucial to India's manufacturing sector and for the country's growth. "If the crop output is not good, rural demand will fall. Urban households are anyway saturated.

Cacophony of growth: The Planning Commission has now announced that the lower-than-projected growth of 7 per cent in the first two years of the Tenth Five Year Plan (2002-07) would make it difficult to achieve the targeted 8.1 per cent growth in the remaining three years of the planned period. According to the current year's GDP growth is likely to range between 6 and 6.5 per cent, so the achievement of the plan target is only possible if the GDP growth in the last two years averages 11 per cent, which is clearly not feasible."

According to Prime Minister Manmohan Singh, the deterioration in the economy since the mid-1990s has been largely due to the neglect of the agriculture sector. "In these circumstances, it is hardly surprising that the perception has grown that the benefits of reforms have bypassed a substantial section of Indian people

Ignoring the infrastructure: Now, India needs is an uncompressed national commitment to building up a strong and modern infrastructure similar to China. But as the present Indian economic team is imbued with the World Bank-IMF mantra, which considers large fiscal deficits the source of all evil, it is most unlikely that such an approach to improve India's infrastructure and social fiber will be actually undertaken. In the coming days, to keep hopes up, a lot more will be said about the impending "flood" of foreign direct investment [FDI] into India.

It is obvious that the reforms process has failed to deliver. The aim of the all the economic reforms was to ensure sustainable growth in agriculture and manufacturing, the two major sectors on which most Indians depend for their livelihood. The impact of the services sector was more incidental than intended. Had the services sector not grown the way it did in the 1990s, India would have ended up with the bizarre situation of reforms pulling down the growth rate.

For a capital-scarce country like India, the government should have ensured more development expenditure, either through its own or by encouraging private participation. But in reality, gross fixed capital formation [GFCF] in the economy grew at a CAGR of 6.92 per cent between 1980-81 and 1990-91, while the same during 1990-91 until 2001-02 dipped to 5.33 per cent.